Qualified retirement plans will experience unusually sharp increases to compensation and contribution limitations for 2023 compared to adjustments in recent years. On October 21, 2022, the Internal Revenue Service (IRS) released Notice 2022-55, providing the 2023 calendar year cost-of-living adjustments, also known as COLAs, for tax-qualified retirement plans. The spike is widespread, with increases to each of the statutory limits in the table below. The increases are effective January 1, 2023.
| Internal Revenue Code (IRC) or Regulation Section | 2023 | 2022 |
| Annual compensation limit: IRC §§ 401(a)(17) and 404(l) |
$330,000 | $305,000 |
| Elective deferral limit: IRC §§ 402(g)(1) and 457(e)(15) | $22,500 | $20,500 |
| Catch-up contribution limit: IRC § 414(v)(2)(B)(i) |
$7,500 | $6,500 |
| Defined contribution plan limit: IRC § 415(C)(1)(A) | $66,000 | $61,000 |
| Defined benefit plan limit: IRC § 415(B)(1)(A) | $265,000 | $245,000 |
| Highly compensated employee threshold: IRC § 414(q)(1)(B) |
$150,000 | $135,000 |
| Key employee dollar limit in top-heavy plan: IRC § 416(i)(1)(A)(i) |
$215,000 | $200,000 |
| Qualified longevity annuity contract premium limit: § 1.401(a)(9)-6 |
$155,000 | $145,000 |
| SIMPLE maximum contribution limit: IRC § 408(p)(2)(E) |
$15,500 | $14,000 |
| SIMPLE catch-up contributions limit: IRC § 414(v)(2)(B)(ii) |
$3,500 | $3,000 |
| Simplified Employee Pension (SEP) maximum compensation: IRC § 408(k)(3)(C) | $330,000 | $305,000 |
| SEP minimum compensation: IRC § 408(k)(2)(C) | $750 | $650 |
| Employee Stock Ownership Plan (ESOP) limits: IRC § 409(O)(1)(C)(ii) |
$1,330,000 $265,000 |
$1,230,000 $245,000 |
| Social Security taxable wage base | $160,200 | $147,000 |
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
